Canarc Resources Corp. TSX-V:CCM - OTC-BB:CRCUF
     
 

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SHAREHOLDER UPDATE

Third Quarter Review, 2001

Vancouver, British Columbia, Canada, October 12, 2001

Bradford Cooke, President and CEO of Canarc Resource Corp., is pleased to provide shareholders this review of the Third Quarter and plans for the Fourth Quarter of 2001. Over the past three months, Canarc focused on relocating its field offices in Mexico and Suriname and dealing with Grassalco regarding their breach of contract on the Benzdorp property.

The Company’s focus in the fourth quarter will be on moving the Benzdorp project forward as well as reviewing possible new projects. The New Polaris and Bellavista gold mine projects remain on hold waiting for higher gold prices. However, with the recent increase in activity for the price of gold and gold stocks, it would appear that a better gold market may be on the way.

Mexico

Canarc reduced its office facilities in Mexico down to a small office in San Luis Potosi with a part time administrator. No field work was carried out but we received two new gold property submittals and are currently evaluating them.

Suriname

We moved our office in Suriname into a small house in Parimaribo and sold the excess equipment and furniture. I also met with the Chairman of Grassalco in Suriname and have corresponded with the Minister of Natural Resources with regard to a resolution of all the outstanding issues on the Benzdorp property. Both the government and Grassalco say they wish Canarc to move ahead with the development of Benzdorp. We have offered to get back to work as soon as we receive the titles to the concessions.

Commentary

The tragic events of September 11 have had an obvious negative impact on the global financial markets. Gold has been one of the few beneficiaries due to increased investor demand for gold and gold stocks in times of political and economic instability. But senior gold stocks had already appreciated significantly earlier this year, anticipating a rise in the price of bullion. Clearly, the underlying fundamentals for gold had already bottomed and a new bull market for gold was a distinct possibility. The insecurities of our new world will only hasten that.

On the demand side of the equation, global demand for gold jewelry continues to grow every year, either slowly during recessions or more rapidly in periods of economic prosperity. Investor demand that evaporated in 1996 has reappeared since 11 September. More recently, the world’s major gold mining companies announced a $200 million advertising campaign to boost consumer appetite for gold, much like the very successful campaigns conducted by the diamond and platinum industries. Gold demand is important but it has not been the key factor driving the gold price in recent years.

Gold supply has been the critical influence on the price of gold over the past decade, principally due to the move by central bankers worldwide to significantly reduce their gold bullion holdings in favour of US dollar denominated holdings. It made good business sense, gold bullion is expensive to stockpile securely and does not earn the interest that dollar investments make, global economies were enjoying robust growth and inflation had all but disappeared.

But now all that is changing. Global economies are sliding into recession due to the excesses of the 1990’s and the terrorist attacks. Governments have sharply increased money supplies to maintain liquidity in financial markets. Stagflation or worse, deflation, has once again reared its ugly head. Government spending is rising sharply and public debt and deficits are sure to follow. In such an unstable fiscal and economic environment, central bankers should become more inclined to hold onto their gold holdings.

At Canarc, we believe the evidence for an emerging bull market in gold is difficult to ignore. We have therefore prepared for a new phase of aggressive growth by paring our costs to the bone while maintaining all of our key gold property assets in good standing.

The New Polaris mine has a 1.5 million oz geological resource still open for expansion. The Bellavista project reports a 550,000 oz mineable reserve ready for development. The Sara Kreek mine continues to break even at current gold prices and the high grade DP zone is also ready for development. Last but not least, the Benzdorp project holds the potential for a significant new gold discovery.

Sincerely,
CANARC RESOURCE CORP.

 

Bradford J. Cooke
President and CEO



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